right. the growth flows under the back net tends to be larger. so the latest creation and destruction of jobs would be in the millions per month. so i think there's are hole in our policy that we're not doing enough to slow job destruction. and jean baker and bob and i have been working for a couple of years on a project where we basically allow firms to sort of spread the unemployment insurance out amongst workers who have their hours cut in a proposal we call work sharing. so the idea would be that if the firm lays you off, you get unemployment insurance, but if they reduce your hours to 20%, you get nothing. so why not if five people get a reduction of 20%, they can get that from their unemployment insurance. given these growth spurts are

so large, if we could float job destruction by 100,000 or 200,000, instead of 155,000 created, it would chart as 255,000 jobs created. host: bob? guest: i think the job sharing idea, all these are much creative. kevin alluded to something in the end that i think is important. we sort of say the words small business. it's not even clear what the term means. you know? many of the definitions of small business, you've got launches, medical practices, hedge funds and wall street. not the corner store or the guy

starting the small factory. it's a very emohr force term. it also indicates that the idea of vismly all job creation is in small business greatly overstates that. i'm not denigrating small business at all. but both parties on the hill run around distorting the economy to whatever the particular definition is in the bill of small business. to where as other sorts of policies, whether they are in tax reform or better education in training. whether they are in the kind of job sharing that kevin mentioned, there are a lot of other ideas that really need more attention rather than having members of both parties compete with each other to see who can give biggest new tax

break to some group labeled small business. guest: and there's also this terrible self-fulfilling prophesy going on. but our large businesses are taxed just about more than everybody on earth. and so could be that the policies are so out of whack and to use it to justify a bigger subsidy for small business and eliminate that for big guys is not good. guest: and corporations are aggressive in using lots of tax loop holes. it's legal behavior. we ought to close the loop holes. but it is legal behavior. it is well known the single largest area of tax non-compliance, illegalal

activity is in the small business sector where lots of income isn't reported at all. so whenever it is tried reduce non-compliance in the private sector, they go crazy and then talk about better taxes. new firms, old firms, as long as they are productive and effect i have, that's what you want. >> let's look at the numbers of national unemployment. back in december of last year, the rate was at 9.4%. that eased up a little in january to 9%. since then it went in february up toward 9% and hit the number in may. it was 9 -- jimmy from chicago,

good morning. caller: good morning. i've got to tell you kevin and robert. y'all are terrific. i wish y'all had you're own talk show. i love the candor door and the way you're communicating the complex answers. it's breath taking to hear you two scolers articulate these issues in a simple way and with so much respect. this is how the discussions should go forward. you mentioned two years ago we were losing 800,000 jobs. that's empirical data. we've stopped some of that. the whole idea of cutting, cutting, cutting, is counterproductive. as you all suggested, we would end up putting more people trying to get government help to survive. it appears that we're coming to a point where we're going to have to accept a certain level

of employment. typically unemployment was at 4%. i think because of all the competition that's going on globally, it's going to be difficult for us to maintain certain jobs in america. so the unemployment or whole idea of full employment may have to be changed. we're going to need more government assistance for those which appears won't change. but in terms of counter socialism is where dis-- the rhetoric and heat should stop. we're talking about competing with people who pay 20% of what we pay. there's going to have to be government help to help those who cannot maintain employment. host: well, let's get a response from kevin hassett. talking about the idea of using a socialist label.

what do you think? guest: thank you for those kind words. i hope my teenage son, who has a different opinion about how i speak is watching right now. [laughter] guest: i agree there are words out there that get abused. socialism is one of them. the expansion of government that's occurred under president obama is something i wouldn't have supported or didn't support. and i opposed it. i think he sort of set us up now that -- to have a big problem that if he fixes it, i will agree with his ideas retrospective. and i know he's not a socialist. i think that poisons the con very -- to do so in a gradual way so that we content have a

gradual immediate big recession due government spending. bob maybe doesn't agree with that, but i don't think that makes him a socialist. or i don't know, maybe he used to be. [laughter] guest: i think the problem in washington is people, over time, i kind of have been operating in this game for more than a decade. i think that sometimes people start to get really angry at the other guys, and to use them as evil. and then the rhetoric gets really heated. but for me, i always remember the words of frank wade was the director of the church here in washington where my family attends and once gave this sermon that said you should never ascribe to something in malice that could be easily ascribing to stupidty. i think the people who succeed

in the long run in washington are the people that understand people can sometimes be mistaken but that they are not bad. i wish people would remember that when thinking about words like socialism. guest: plus americans strongly favor medicare and other things but didn't mean they are socialists. i'm actually going to disagree with some of the things that kevin said. i don't think it's acktroot say that president obama has greatly expanded government. government -- we're spending a lot of money on unemployment insurance. that will go away when the economy recovers. the one area where there is an expansion of particular note is in the health care area. but it ought to be noted if we're talking about terms like socialism, the obama health care goal that is now the health reform law, is actually

very similar to the kinds of proposals that moderate republicans advanced years ago. similar to the bill the late john chafey, the republican senator at the time from road island advanced. and republican richard nixon proposed when he proposed mandated health coverage for the government workers. i also have to disagree with kevin on the idea that we really can get government 18% or 19% of the g.d.p. it was 22% on average under ronald reagan when yet no baby boomers had retired. we do have an aging population. the number of americans who are

elderly will go up from 13% to 20% of the population. health care costs in the private and public sector are going up. we didn't used to spend money on homeland security. since 911, we do. you can't get spending down. no one i know of -- i don't think you'll find people in either party, including democrats, who are talking about having a government the size of almost any western european country. but i'm going to end by agreeing with the caller that particularly now in the economy is weak. it would be very counterproduct toif do the kind of budget cuts many mornse want to put into effect starting on october 1, that would run the risk of slowing growth more and maybe tipping us back into another

recession. host: republican caller in richard, virginia, roy, good morning. caller: good morning. good discussion. the problem as i see it is people like mr. greenstein who want the government to do everything for everybody. he wants to force us to drive electric cars and high-speed trains and thinks the government should just expanned and expand. but you cannot have liberty without life and you can't pursue life without liberty. the average person who wants to be responsible and invest his money and pay his way through life, the average business is scared of the government. this government that wants to control everything we do, and

it's a jimmy carter chicago mentality and they are telling the children in a school you can't even bring your lunch to school. host: going away to speaking about bob greenstein, he mispronounced your name a little bit. >> he was talking about some guy bernstein who is not on the set. because what he attributed to have my views actually actually aren't. in every area where the market is the better place to do it, i think we need public schools. i don't think -- you have to figure out what is the appropriate role for the public sector and private sector? the caller also indicated something else that i think is an issue in terms of many policymakers, people

understandably have difficulty distinguishing short-term, especially during recessions. in the short term when the economy goes down and consumers aren't buying, you need the government to do more to help a recession from turning into a depression. you need a lot of that expansion to be temporary and go away when the economy recovers and in a long-term, we have fiscal payout and we need to raise more revenue primarily by closing unproductive tax breaks and subsidies that are in the tax code. whether you are closing unsubsidied things to taxpayers or you are retraining a government program, i think that will be necessary in

areas. and you have to ask what are the things the government does best? what are the things the market does best? and what are the things boat of them do well together? host: we are joined this morning by bob greenstein and kevin hassett from the american enterprise institute where he directs the policies program. caller: good morning. i'm curious. i'm a real independent. libertarian. and i spent some time in washington, d.c. in the 1960's. so i know where a lot of our economic problems have come from. i was in vietnam. spent my 20th birthday there. a couple short comments then a very serious question. one, i remember the age quite

well. i remember reagan dumping revenue into the government. but i also remember the democrats tripling spending. and i also remember that was a time during the 1980's up until about 1997 when they were red lined. of course we were a bunch of losers. that's understandible. we're baby killers to our peers. but in this country we are $15 trillion in debt. we have something in the neighborhood of $70 trillion in unfunded mandates coming up. we have regulatory nazism and health care is running amuck in this country. we have an illegal and unconstitutional drug war that's making the leaders not compete in the world. so my question to all you government thugs and lap dogs and people in the media, what

are you going to do about it? host: well, we're talking about job creation. do you have a specific -- caller: i'm sorry? host: we're talking about job creation this morning. caller: so what are we going to do? because if we content have jobs, this country is going down. host: let's go to kevin hassett to get a response. guest: well, thanks, gary, for your service. i know the marines, a lot of serious action in the vietnam war, and we're very grateful for that. i think the debt and the zeft that you mentioned offer both an opportunity and a challenge. i think the opportunity is with things so out of whack, it's natural for people to be wary about the future of 4erk -- future of america. investors and such. because you content know exactly how it's going to work

out and you content know how badly it's going to be. there's a recent warning about u.s. debt possibly being downgraded. it can lead to a spimplete because then your debt goes up and then u downgraded again. then the interest goes up. but we could be looking at a crisis and the here's the opportunity. our hope the they content want to fix it in the next crisis, but they want to fix it now. i agree with the tone that if we content get ahead of the curve with this, something really bad is going to happen in the median turn, and when that does, all bets are off on how low it could go. and i think right now since people are anxious about that potential, we're naturally growing slower than we could,

if we can just be responsible adults. host: thank you. bob? guest: actually revenues didn't double in the 190's. spending didn't triple. and the big spending during reagan was on defense. reagan wanted a huge increase in the defense budget, which he got. as we've been saying throughout our show, here, a long-term fiscal fix is not sustainable. that doesn't mean in months we're going to face a greece-type problem. we're really in much better shape than that. no one really knows if we didn't do anything long-term about the fiscal picture, there's at some point a risk where there would be problems in the markets. would it be in four years? 15 years? no one really knows.

and kevin and i agree that sooner is better than later to start taking action. although as i said, i wouldn't immediately cut programs or increase taxes right now while the economy is staffed. but you can enact the changes and schedule them to take effect. there is a bigger issue here, and that is we obviously -- we're a de mock can i, -- a democracy. but there's differences in power. some people have access. have lobbyists. made big campaign contradicts and the like. i think one of the big challenges is not only to 1/2 i gate our way to -- but to do it in a way that's fair that doesn't overly benefit people at the top of the income scale and aim the reduction at the people in the middle and the bottom.

we really need equity and how we go about it, good economics add equitable choices. and it's going to take a number of years. because there's big issues here. we're going to have to be at this for a number of years. host: our democratic caller in georgia. hi, margy. caller: i'm perplexed by the fact that companies in other countries that make billions and billions less than ours seem to get by just fine with higher taxes than we do. and they pay their workers more. and these countries have a gross national product a quarter of ours, yet all their people are getting medical treatment. they don't have to sell their homes and live out in the street. but i'm not some poor down in

the dumps person, but these people and him on tv and i've watched a lot of conferences. one lady was saying if they can get the same health care as me how does that make me feel? well, it ought to make her feel like crap, because she is. when you're sitting there making yourself feel lower because somebody gets the same health care, because all of america pays for y'all's health care and dental care and judges that strike down all these rules, and it's not right. and we're lied to every day by people who come on. because you have your meetings, and people are dying. do y'all know that people are dying? host: sounds like margy's mostly concerned about politicians and the like. but kevin hassett, you know, let's talk about what some of

her concerns are. guest: well, whenever we have an event, we always bring people with different views, and the conversation we have been having is 'em ble matic to a conference so, there might be someone there that she disagrees with, but unless there's something going on there she disagrees with -- i think the yithes being a wealthy nation is true. the fact that we have or are about to have the highest tax on earth is harming not the rich guys but the poorer, blue collar people who need a job. so cutting the corporate rate wouldn't netsly reduce taxes for u.s. firms, because they are already paying low taxes abroad. but it would bring some business home. host: kevin hassett, what needs to happen in the next six

months of time in order to create jobs? guest: fiscal consolidation. the big thing is we need to get our house in order. host: you think it can happen in six months? guest: it has to, or we'll have a really slow recovery. guest: i'd like to see a bipartisan agreement. i think we're going to need to continue the support we're now providing and unemployment insurance perhaps in a payroll tax deduction. these are both temporary. and i have to make sure we first do no harm, the hip cratic oath. be not further cutting education and make state and local governments lay off more teachers and police and things like that. if anything, we should be

finding ways to ease the temporary pain state and local governments and businesses are experiencing now. because we need to have more >> next, the latest on the resignations from the campaign staff of newt gingrich. "usa today" headlines. to give some information about this and shed some light on what is going on behind the scenes, are joined by. wilson from "national journal." good morning. what have you found out about why his staff members left? guest: he had a rocky blowout a

couple of weeks ago when he announced his campaign. he sort of announced and unannounced and then bree announced. it is probably the worst rollout we have seen niki 2012 -- we have seen in the 2012 run so far. then he promptly went on a vacation to breeze. -- greece. he did not look like he was going to be willing to go to iowa and at other places to woo voters. a lot of his staff had just come on to the campaign recently. i think it is most telling backed his spokesman rick tither and the south carolina advisor,

kate dawson, left. they have both worked for him for a number of years and their departure signals a disapproval of the way he was going to run a presidential campaign. host: 16 of these lawmakers visor's left. -- and advisers left. how typical or a typical is this? guest: is not terribly usual rembert, ronald reagan left a remember,ber of -- brambl ronald reagan left a large number of staffers before he became president, but it is not normal. newt gingrich is not the force in need republican par that used to be.

he does not rank among most people's idea of the top tier. we're talking about tim pawlenty and perhaps some candidates that have notone into the race yet. one thing that newt gingrich really does is open the door for rick perry, the governor of texas. two of his top political advisers left to work for newt gingrich. now they have time on their hands and can go back to working for him. if anything, that realization that newt gingrich is not in the top tier of the presidential campaign means that rick perry can be. i would expect him to get into the race in short order. host: your p's for today -- the

piece you ote for today is titled "rick barry's moment." where are his people defecting to? guest: there not defecting to anywhere in particular just yet. yet.re not going anywhere and they do not have to. there is plenty of time left. there are other candidates. we will see michelle baachman jump in probably sometime before the end of the month. and perry is thinking about his own campaign. probably some others as well. not leaving to start somewhere at a new job on monday.

but newt gingrich is no longer among and top tier of contenders. host: for those of us on the outside, we might hear of one staffer resigning, or a couple. how is it to go in one big block? what is the communication like? guest: fortunately, i have never had a lot of people quit on me and i have never been a part of a big group of people. i have had a happy career. but it is something that has been building for weeks. it does not happen overnight. he just left on vacation for two weeks and that set a bunch of his advisers. the same thing happened with the mccain campaign. a lot of folks had become discontented over a long time frame and a friendly end up leading. it is not some that just happens spontaneously. host: and finally, what do we expect to see from newt

gingrich? who does he liste to right now and how do we see of his campaign survives or falters over the next couple of weeks? guest: has always listened to one person first and foremost, and that is newt gingrich. he keeps his own counsel very closely. he will participate in the presidential debate in new hampshire on monday. a lot of this strategy that his advisers disagreed with add to do with making a big impact in the early debates and setting himself apart in theield. he really has to go big or go home now. especially because the money is beginning to dry up. we heard some reports that as a part of these staff departures, he is having trouble made -- raising money. he is not able to tap into this

network of large corporate contributors that everybody gave to that everyone jokingly inc.s to new tt, he has got to do something big to getack into this race to make it known that he is the candidates who still has the best, biggest, oldest ideas, just sort of newt gingrich being newt gingrich. host: thanks for joining us. >> tomorrow, dina eiboghdady talks about proposed regulations on mortgages which would limit debt, including credit card, auto loans, and student loans to 36% of gross monthly income.

evan perez looks at an alcohol, tobacco, and firearms program to help keep guns out of the mexican cartels. and christopher boucek examines the u.s. role in yemen. "washington journal" live at 7:00 a.m. eastern on c-span. next, the european commission president takes questions from members of parliament on immigration. then robert gates on the future of nato. after that the outgoing chief of the white house economics forum. >> now available, c-span's congressional directory, a complete guide to the first session of the 112th congress. inside, new and returning house and senate members with contact information, including twitter addresses, district maps, and committee assignments. house, supreme court justices, and governors. order online at --

c-span.org/shop. >> each month the european parliament is in session, president jose manuel barroso takes questions from members. make -- is made up of 36 members from the european union. this month they question the economic stability of the euro zone. this is an hour. >> the first item is question time with members of the commission. the first question will be asked and comments will be on behalf of the people of the european party. >> president, first of all, i

can smile but we have survived the evacuation procedure and the fire alarm. as of representative, i like to put a question to the president of the upp. looking at the pictures we've seen from the mediterranean in recent days and weeks where people are fleeing the situation in africa and have come to the shores of europe, some of them of people who have perished at sea. we know that this is a common european challenge to come up with a solution to this drama, this refugee crisis. i would like to act -- as the commission's president to give his appraisal has how the convention is dealing with this and whether we have the resources in the european union to react where is needed, but

also having the necessary wherewithal to act. and the third question is, in the discussion of countries of and whetherorigin, we are making headway and progress. >> thank you very much. we are aware of recent events that has resulted in a loss of many like. i agree with you that we need to take more action. there was an immediate response with humanitarian assistance and this will continue to coronate the response to the strong migratory pressure. it is very important that we work together to coordinate efforts. more needs to be done.

my direct answer to you is that we need more resources. the proposals need to be urgently adopted, and we also need member states to show solidarity by offering a technical and human necessary means. we do not have all of those means. we need the cooperation of the member states. >> thank you very much. the second question. >> thank you for those comments. you're saying that we need more resources. i would be interested to know whether there is a proven theory that the countries had not been prepared to stock up sufficiently, but they did not seem to be an up willingness

from the member states to support this. if you believe that is the case, that we need those resources now. >> this debate is ongoing. this is one of the topics of the european council. this month, the 23rd or 24, and that thing now not only the member states should adopt the proposals already put forward, but also a think it is important to put more logistical means, more planes, and that we cannot have from our budget now. i think there is political will to do that but it has to be done in a coordinated manner. the commissioner is working on this now with member states and i hope the european council, the

23rd 24 of this month, will confirm this. at the same time, we need the full cooperation of the host country. i spoke with the prime minister of one, and they are cooperating. there were logistical, pragmatic agreements. >> i like to ask -- i would like to ask you to ask in this question. >> some of our colleagues are still in the fire exits. ok. dear colleagues, yesterday the commissioner announced a number of important steps in the commission. a rescue mechanism, he asked for

a number of things. it is necessary that this mechanism can provide a flexible credit line, and there has to be ability to go -- most beauport and -- most important, he said that this could be done with their own triple-a-rated bonds. [unintelligible] you can swap that down from country to aaa bonds of the mechanism. he also announced that the commission should start to examine the possibility of euro bonds. finally, i should say. there we are. my question to you is can you confirm that this is also the position of the commission? and secondly, sorry, as time is pressing, shall you propose

these changes on the emergency mechanism to the next european council in june in two weeks? >> i want to confirm that all the ideas put forward by the commissioner have of course my full support and involvement. i will not repeat what he said. regarding the esm, we are now on the process of establishing that. i think they will very soon agree on that. i hope that the european council, that there will be a political decision confirming the decision regarding the european stability mechanism. and you know what our position is. and the european commission for many years, including one of my

predecessors, has put forth the idea of the euro bond. others have not accepted. when we had the crisis with greece, it was not rejected by a number of the member states. there is some progress in coming to consider several options and the commission could present several options. we always thought the idea of a euro bond could be supported. but we are not yet there. all we have to do is focus on this. >> i do not think that the crisis is so recent. we have to find additional instruments.

one that is being proposed, a swap from band bonds -- bad bonds from one country to triple-a-rated. but this does not matter, it is the mechanism that is important. and for the first time the commission recognizes that this is the way for. -- way forward. >> it is easy for you to agree with what i say, but in fact we are saying exactly the same thing. the commission in the survey, we were thinking of more intervention in the market. that was something agreed by the

member states. the second thing i can confirm to you is that we are along that line. we are trying to increase for -- decrease foreign intervention in the market. but we should focus on the attempt and consider other options for the future of the eurobond if the member states are ready to get that additional step. >> thank you. >> i will speak in chek. >> as you aware, we are not members of the euro group, but we would not like to see the bureau failed. -- euro fail.

we have mixed feelings about what is happening. we are getting contradiction of signals. the international monetary fund comes up with a third reason is own possession. and it is always the political positions which have the upper as for debt restructuring, what is the final position of the european commission? do you want to continue hand over fist providing endless amount an increasingly large amounts? you know that some of the country's [unintelligible]

is a reason starting to get the upper hand now, and is your position starting to change? >> the problems we have an economic terms in europe, some member states out of the euro area are also in other programs. regarding the euro area, there are ongoing discussions between the member states and the council and the european central bank to have the best possible comprehensive response. there is not always expert agreement on the best way to get that response. this is still work on going. these issues are extremely difficult and complex. the magnitude of the challenge is unprecedented and it requires some work of convergence.

some of the issues are market sensitive. one thing is clear, debt restructuring is not an alternative to the painful fiscal efforts that all the member states have to do if they want to correct their deficit and debt. >> thank you. >> mr. barroso, while the district is that we do not always understand the eu position, i have three points to make. first of all on the restructuring. we know that restructuring will happen over time. restructuring of greek debt, for instance. we have to allow the greek government to recover trust and

confidence, and also cause -- because greek society needs restructuring. at the moment, nobody trusts anybody else, and certainly not the government. until the government starts giving some kind of possibility of a future for its people other than austerity, the economy is unlikely to recover. i think everybody including the european commission should focus on the notion of injecting some confidence into greece. that is essential. with all these austerity measures, the people do not have time to stop and think. it could turn out to be extremely dangerous. tax evasion -- couldn't europe linda handle on this? yeah of bank -- -- you have banks in austria, luxembourg, cyprus and in

. at the end of the day, it is european banks who are covering up tax evasion. >> yes, there is a tax evasion problem in greece. i do not think that is the cause of the structural problems greece's spacing, on the other hand. -- the problems greece is facing, on the other hand. we have been talking about addressing the question of banking secrecy. since 2009, all countries have agreed to measures whereby

information cannot be refused if it is requested by an authority of another bank. that has been covered in an administrative cooperation objective from march of this year. it was published at that date. the banking security question has been addressed. it can allow for a full exchange of information between taxing authorities. member state share information with other countries including greece on any alleged tax evasion or fraud. >> you used all your time, i am very sorry about that. [laughter]

>> i will make my intervention even briefer. recently he said the internet was dealt with at the g8 summit and the ongoing nga forum. i am just wondering why these high bodies are dealing with the internet. i know it is a sensitive issue, but maybe you could fill us in. is this something that is going to be ongoing, on the agenda again? >> i think presidents are cozy ideaesident chiu sarkozy's of the global internet -- sometimes it is abused.

for instance, the exploitation of children. we had a very interesting discussion and there is clear participation of some big , theers on the internet's head of facebook, the head of google and so forth. at the end of the discussion, it was confirmed that the internet would be on the agenda of the g8 again. >> thank you. i would like to put a question to you as to whether you are prepared to just inform us about the negotiations on the internet

because it is an important issue that will affect the future. >> it was not really and negotiation, it was a general exchange of views, brainstorming if you like. the g8 was a big conference where there were major stakeholders from the internet industry. it was not negotiations at all. that is not the way i saw it, anyway. so we asked these heads of major internet companies to tell us how they saw the future of their industry. the other members of the g8 expressed our concerns with the internet, but we did not really have any negotiations in terms of deliverables. >> we have enjoyed a series of

pantomime exchanges on the euro. every time i predicted a country would need a bailout, you come back and say no they don't, everything is fine. and now we face another great bailout, unless today you are going to tell us that is not necessary, either. for more serious, nothing has happened in greece or portugal or ireland today and it is the real sovereign debt crisis that we made base in the next few weeks, and that is the integrity of the ecb itself. month after month i have warned that you cannot go on buying up vast quantities of your own bad debt. mr. roh so, -- mr. barroso, do you accept that the finances of the ecb is now in a series and perilous state? [applause] >> no, i do not accept. i think the european central

bank is a very credible institution and has been managed with great wisdom. i think it is respected by all the member states of the euro area. we know there are some difficulties, but they are not only difficulties of the euro area. your criticism of the euro area is always ideological. in average, the debt is lower than the debt of britain, to give an example. it is the first time we have this kind of monetary union without some more integrated institutional setting. the ecb is part of the effort we are making to give financial stability to the euro area.

>> just yesterday, the respected think tank of europe came out with some figures on this and it said that on the ecb exposure, a staggering 190 billion bureaus is exposure to the greek state and greek banks. should the cbc the bayou of its assets fall by just four 0.25%, its entire capital base would be wiped out. do you accept the findings, or do you go along with the assertion a couple of weeks ago that with the situation in debbie rowe being in serious as it is, you actually have to live in public -- the situation with the bureau being as serious as it is. >> the commission has always been very consistent in the information we have been giving about all the situations. the situation is difficult. we have stated honestly from the beginning that we do not pretend the situation is a rosy

one. on ec be's ability relies the determination to do whatever it takes to ensure the financial security of the euro area. i have no doubts about ability of the european central bank to defend european interest and to revive all the guarantees that the ec be e --cb. there are other central banks in europe in a much more difficult situation. it is a credible, internationally very respected body. >> thank you, mr. president.

the inability to achieve consensus has been proved repeatedly. could explain to me and my electorate how is possible to instigate common policy important areas such as international relations with security without consensus unless we dispense with democratic states to express their own use unilaterally. >> in fact, we are a union of 27 democratic states. in common policies, we have agreed that decisions should be taken unanimously. if the member states do not unanimously agree, we do not have the right to impose a

decision on those member states. i believe it is in our interest that the member states act together in external matters. it is obvious. even the biggest member states do not have the necessary influence our leverage like the united states or china and those powers, but together, the european union can make a difference. >> could explain to me why taxpayers should find a political party on any level? one other question have is

about kathy ashton. i noticed her attend -- attendance at commission meetings is very low. >> first of all, the european parties are recognized as important entities by the treaty that was ratified unanimously by our member states. so there is a reason to support the european parties because they are european entities. secondly, regarding kathy ashton, she is a high represented. she has a very challenging job. of course she has more travel assignments than most of the members of the commission, so she makes a great personal effort to be present in almost all the commission meetings. members of the commission are not there representing countries.

they are there representing the european union. the credibility of this institution comes exactly from this point as we try to be independent and represent the general european union. >> thank you, mr. president. i apologize for my late arrival. i did wait until the end. we are living in difficult times. 2008 was the year that saw a very thorough going banking

crisis. the economic crisis in 2009, banks took on debt and the public also took on debt and that led to a bunch of crises. these have led to an orgy of cuts and austerity so that in certain countries the situation has become less dramatic. there is a danger that 2011 and 2012, after these crises, will lead to a social crisis in europe. if the commission be is the commission willing or in a position to discuss how the underfunding of social expenditures in the european union can be carried into

countries that have been hardest hit by the credit crisis? are you willing to discuss with us about eurobonds so we can get the money to invest in jobs in the hardest hit countries? thank you. >> for each of the 27 countries the commission has adopted recommendations. this is of huge importance for us. austerity, which is of the essence today in order to reduce deficits and debts is a very tricky issue, but at the same time we believe that every single euro which is currently being spent is a euro that does

not exist for hospitals, social security, public education, and so on. that is why we have to have a serious effort to establish rigid to reestablish trust. the thing about structural reforms, protecting the most callable. -- the most vulnerable. there are concerns about the labor market. how can we have the social dimension? we have to see if we can -- we do share the objectives. >> i am sorry, it was one minute 52 seconds. the time is over.

i did not give possibilities for second questions, i am sorry. we have rules, mr. president. >> i am very sorry about that. the g8 summit. one minute. >> i did not want to intervene about g8. i wanted to ask a question of mr. barroso and culture. we have a lot of programs in the european union encouraging young people, but not only young

people, to get together, to meet, to insure it becomes [unintelligible] it brings together a lot of young professionals and it is a genuine forum for the eu. no microphone, i am afraid. >> we have a topic of the g8. please continue. >> i see we had a problem of communication. i was saying that in terms of the commission's -- what is the fate of these programs which are going to expire. it is something we should have been looking at on culture as well. how does the commission intends

to carry the program forward from 2014 onward? it is something of major interest. there are a lot of stakeholders in the eu and a lot of young people in the country. >> when it comes to the commission and the promotion of the cultural aspects of europe, i personally am very much attached to this. i have had an opportunity to meet some of the stakeholders in this particular route. what we are going to do is come up with that position at the end of this month. we will be making some proposals for the future. guaranteeing the ambition of the program such as the one you've enumerated, ones which are symbols for the projects of a system of cultural events for europe.

>> i will stick to the topic. the commission yesterday adopted a strong package of measures on fighting corruption that is costing in the eu 120 billion euros per annum. the commission says implementation is unsatisfactory. would not have been a good idea for corruption to have been raised at the g8 summit? the only reference i can find was about developing countries. no reference at all to help rich countries need to show the political will to tackle the problems of our own backyard and show leadership on this. was this a missed opportunity to talk about corruption and bribery at the g8, especially as russia is 150 four out of 168, and many of our member

states showed poorly. >> corruption was dealt with when we had the average meeting with african leaders but i can tell you that anti-corruption members will be high on the agenda in november. when there is corruption, someone is corrupted but the areas of force that is corrupting. the g8 members were also scrutinized when they discussed the issue with africa. i announced the commission is going to come with initiatives for raw materials. it is easier for summer jinju's -- for some regimes to use.

that was the ankle in which the issue was brought up at the g8. >> you mentioned that ecb a few moments ago and you said it was independence. the central bank is not independent in terms of this crisis. >> it has chosen sides. irresponsible for tens of millions of euros -- it is responsible for tens of billions of bureaus worth of bonds. ecb is under all sorts of pressure because of the greek restructuring, and what are you b?ing about helping the ec b

>> the ecb is independent, i can tell you. with seven years of experience in this position, dealing very often with the ecb, they do not need our support to assert their independence, and i want to reassure you. regarding the issue of restructuring, there are different options. we are considering all the debate, but the position of the commission was a very clear statement. we believe the restructuring is not an alternative to the efforts of member states in terms of fiscal consideration and reform.

that has been our consistent position and we will keep that position. >> thank you. >> thank you, mr. president. on the g8, i would like to know whether the whole question of regulating financial markets was postponed yet again, particularly a transactions tax on putting an end to tax havens , reining in derivatives, getting ratings agencies under control because they have completely lost their credibility and were never very transparent in the first place. the whole issues underpin all the problems facing the european union, particularly ireland,

portugal, and greece. measures are being imposed which impose austerity on ordinary, working people. this means increased exploitation and it means more poverty, lost of bridgette loss of more jobs and more inequality. don't you think it is contradictory to all the principals that are spelled out in that treaty? >> on financial regulation of the markets, the g8 is the key forum for governments on these issues. it has given priority to these issues and always has. these issues were covered. it was i, myself, who set the

ball rolling on the discussion on of financial transaction tax. i did so in conjunction with development aid. my position is very clear. i am in favor of a financial and capital transaction tax and we will come forward with some ideas on this in the near future. on the second issue, we did talk about the eurozone and the problems we are facing. we believe that without proper reforms we cannot pursue the objectives that we share which is a social market economy. >> at the g8 summit, the participants debated the commitments to the policy in the mediterranean. on behalf of the european union, you have committed 1 billion

saying is for neighborhoods, which might have been understood as just for show. we know from -- that an initial phase of 150 was for the east and all the rest was for the south. it contradicts eagle attention being paid to both neighborhoods. how would you explain, and what did you commit factually to the cell mediterranean never good policy within the context of the amount of money that has been given by you? >> let me tell you very frankly that i understand the concerns you have. frankly, i think the most important issue is not to put in competition the east and south. what is important is enough to

help those that want us to help them and do it in an effective way. it is clear that it is based on conditionality according to each partner's progress going forward. those who do more, those who show that they deserve more will receive more. the country has to show that -- we will fulfill our commitment based on our eastern european partnership to our neighbors in the mediterranean.

>> thank you very much. mike pratt -- my question links to the previous question and the answer you gave. you spoke about the aid being granted most notably to the arab emerging republics. and money coming from the member states as well. the aid is conditional on a certain number of conditions, regular elections, freedom of the media, independence of the judiciary, all of these criteria you were well aware of. what i like to know is who will be appraising in these arab democracies? it will be making sure that these criteria will be respected? will our parliamentary -- be fully implicated in this conditionality that is being put

in place or is it a question of more discretionary powers from the council? >> our idea, and i hope you would agree to it, is that the commission is running this exercise. i am extremely proud that it is the commission with the high representatives who managed to put forward the blueprint of our response for a partnership for democracy in the northern african area and the mediterranean region and the partnership arrangement. working with the council, there is recognition that it is the commission that is leading this set up, and the commission is answerable to the parliament. anything the parliament is interested in doing to be more closely implicated with what is going on, i would welcome. there are strategic aspects that are developing not just for the

local region but for europe and the rest of the world as well. i welcome the interest of the european parliament. >> i was reading economic data for 2009, according to which there was $58 billion international gdp. at the same time, in terms of monetary policy that we are dealing with, we are talking about new dollars as well, but we are not actually issuing these currencies.

economists do not agree on a lot of things. we are talking about very expensive loans that are coming about not in the second round. also, we are not going to be able to welcome moving to a macroeconomics situation because we are facing a recession now. the eurobonds, do you see this as a means of facing up to the major changes we are seeing, about? >> it is strictly with the g8 meeting, but maybe some points are similar. >> this question should have been in the first part of our debate. i can respond to the distinguished member of this parliament and say that the position of the commission has been over the years, one that is

very open and sympathetic to the eurobonds. the reality is that there was no agreement between the members. there is a european stability mechanism to become the no. 1 financial institution in the world in terms of financial strength. that is where we should not concentrate our efforts. at the same time, we are open to discuss with the member states and the parliament several things regarding the possibility of eurobonds, providing there is the willingness of the member states to consider it. >> thank you for answering the question that was submitted. there has been a very

problematic connection with the g8. >> the recent g8 summit wanted it to be known that it was providing $40 billion to egypt and tunisia for overthrowing dictatorships and embracing democracy. however, the g8 statement said it would support countries in the region, but moved not just for democracy but to echo third market economy. they want to engage with investment integration, which means making it easier for g8 countries to make money in these countries and then take the money out again. i would not object to recipients of aid being expected to maintain democratic institutions and procedures. however, is it not sinister that recipients should be told which economic policies they should choose and which they should discard? surely donors have no right to instruct these new democracies as to which democratic forces

they should make. >> i agree the perspective that was adopted by the g8. i think it is in our common interest to have not only open society but open economies. these countries are our neighbors and i think the best way to help them mostly is through trade. we will never be able to put the amount of money they need if they stay close. the trade among themselves is almost insignificant. at the same time they are asking us to open our market. i think it is important that we say yes, we will support you, but you should also open your economy.

the progress of the countries is very clearly linked to their ability to integrate into the global economy. they can be dissipated in the global economy and read some benefits for their people. >> the final declaration from the g8 summit as far as the middle east is concerned states that negotiations are the only way towards a global and lasting solution to the conflict. israel and the palestinian authorities must respect the current agreement and not take unilateral measures that could hamper progress and reform. the european union is an important player in the g8. does it support that declaration?

have to inform the palestinian party which is planning to take unilateral step in september? >> regarding the middle east peace process, i do not remember in 30 years with the issue was not mentioned. we have restated our urgent call for resuming the peace process and ask both parties to reach engage in talks to bring a conclusion to the middle east peace process. we all commended the new u.s. vision as groundbreaking and forward-looking. however, there were different reactions to the details of this new vision. there are two approaches among the g8 partners to the issue of the 1967 borders. there were also some concerns around the table about the

risks entailed in a palestinian endeavour at the next united nations general assembly. >> that is what we are discussing also with our member states. >> thank you, mr. president. the g8 countries decided to grant $40 billion to tunisia and egypt, as has already has been stated. the eu must call for more transparency and visibility and better governance to emphasize fundamental points like transparency in developing

corporations, ensuring respect for human rights, but also boosting the role and capacity of civil society organizations and also reorganized that aid system with greater involvement of the european parliament. the eu must ensure that the target populations receive this aid. what specific measures is the european union plan to achieve this? >> madam, you express my very thought. i could not agree with you more. we are going to do precisely this. we have a number of different instruments to ensure the commitments of our partner countries are delivered on. i can assure you that the european commission and a high representatives will appoint a

special representative to monitor this. we believe it is by means of this kind of dialogue that we cannot afford real assistance, particularly by boosting the participation of civil society. i've recently in tunisia -- i was recently in tunisia and it was clear to me that they believe our commitment is important, not just a commitment to their government but also to civil society. i think parliament's involvement and commitment will be very important. >> in the recent g8 summit, you

discuss the global economy. you agreed on efforts to make public expenditure it more sustainable and also to combat unemployment. all that is done in terms of society and its citizens. look at the example in greece. recently, tens of thousands of citizens have been coming out onto our squares and croats are around parliament. they are desperate. they are coming out and asking for prospects. i am sure you will agree that no policy can be effective if they are not supported by the public. this policy increase basically is limited to exhausting austerity and bankruptcy. that is what it boils down to. it is an essential political issue. what message would you send out to these people who was great dignity and in a peaceful manner

are actually expressing their views and asking for a brighter future for their own families and their children? thank you. >> i want to express my solidarity with the greek people and i understand the difficult moment greece is now experiencing. i also believe is the responsibility of the political leaders to show what is necessary for the countries to do. in fact, without structural reform and fiscal consolidation, greece will not come out of this crisis. the reality is that some painful measures are unavoidable in greece. as anyone who pretends the country -- my appeal to the greek leaders is to explain an honest terms to the population of greece the difficult choices that the country has to do. i was in the european council to

propose a reduction of interest rates to greece in terms of the loans that were given to greece, but at the same time, let's be honest. reece has to make the effort. one country cannot live forever with such high levels of debt. this is the honest message we can convey. [applause] >> president barroso, i am glad you raised the problems of the eurozone at the g8. we all know is a crisis. like the previous speaker mentioned, many members states, we had issues in madrid where people were protesting on the streets, and on lisbon, and we see what is happening in greece as well. isn't it time that you actually stood up and tell the truth and

say there is an option that these countries should be allowed to leave the eurozone? that is the only way out of it, i think. thank you. >> respect very much all art autocratic states and is not up to me to tell them what they should do. of course we know that greece has no intention to leave the eurozone. i am in constant contact with the authorities of greece. i know very well that they do not want to leave the eurozone. some of you distinguished members, your country is not in the eurozone, and we respect that. the country has difficulties and we are trying to support it, but once again, the reality is there are countries outside the

eurozone that have at least comparable problems. iceland is not a member of the eurozone, and iceland went bankrupt. there were one of the richest countries in the world before the financial crisis. there are countries facing the same kind of difficulties because of high levels of expenditures. the problem is a very high level of debt or deficits in the economy. >> thank you, mr. president, for being with us for an hour, giving answers to some very difficult questions, and thank you to all of you. i close the debate. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> next, defense secretary

robert gates on the future of nato. after that, austan goolsbee takes part in a forum on job creation. then the european commission president tex parliament questions on aid and immigration. this week on "road to the white house," an interview with former new mexico governor rick gary johnson. he talks about how he would reduce the national debt and the federal deficit. sunday at 9:30 p.m. eastern and pacific on c-span. >> the c-span network to provide coverage of politics, public affairs, non-fiction books, and american history. it is all available to you on television, radio, on line, and on social media networking sites. find our content any time through cs bans video library. we take c-span on the road with our digital content bdo.

-- digital content vehicles. created by cable, provided as a public service. >> in his last policy speech as defense secretary, robert gates warned of a dim future for the trans-atlantic alliance, as nettled members fail to increase defense spending and their commitment to military operations. he stressed that the u.s. is shouldering most of the cost of nato missions in afghanistan and libya and said it would be increasingly difficult to convince the american public to support the trans-atlantic alliance without a greater contribution from its european allies. this event, recorded in brussels, is about 20 minutes. [applause] thank you, mr. secretary general, jaap, for that kind introduction. and my thanks to giles merritt and the security and defense agenda for the opportunity to speak here today.

this is day 11 of an 11-day international trip so you can understand why i am very much looking forward to getting home. but i am glad - at this time, in this venue - to share some thoughts with you this morning about the transatlantic security relationship in what will be my last policy speech as u.s. defense secretary. the security of this continent - with nato as the main instrument for protecting that security - has been the consuming interest of much of my professional life. in many ways, today's event brings me full circle. the first major speech i delivered after taking this post nearly four-and-a-half years ago was also on the continent, at the munich security conference. the subject was the state of the atlantic alliance, which was then being tested with the

resurgence of the taliban in afghanistan. today, i would like to share some parting thoughts about the state of the now 60-plus year old transatlantic security project, to include -- where the alliance mission stands in afghanistan as we enter a critical transition phase, nato's serious capability gaps and other institutional shortcomings laid bare by the libya operation, the military and political necessity of fixing these shortcomings if the transatlantic security alliance is going to be viable going forward, and more broadly, the growing difficulty for the u.s. to sustain current support for nato if the american taxpayer continues to carry most of the burden in the alliance. i share these views in the spirit of solidarity and friendship, with the understanding that true friends occasionally must speak bluntly with one another for the sake of those greater interests and

values that bind us together. first, a few words on afghanistan. i have just returned from three days of visits and meetings with our troops and commanders there, and come away impressed and inspired by the changes that have taken place on the ground in recent months. it is no secret that for too long, the international military effort in afghanistan suffered from a lack of focus, resources, and attention, a situation exacerbated by america's primary focus on iraq for most of the past decade. when nato agreed at riga in 2006 to take the lead for security across the country, i suspect many allies assumed that the mission would be primarily peacekeeping, reconstruction, and development assistance more akin to the balkans. instead, nato found itself in a tough fight against a determined and resurgent taliban returning in force from its sanctuaries in pakistan. soon, the challenges inherent

to any coalition operation came to the surface - national caveats that tied the hands of allied commanders in sometimes infuriating ways, the inability of many allies to meet agreed upon commitments and, in some cases, wildly disparate contributions from different member states. frustrations with these obstacles sometimes boiled into public view. i had some choice words to say on this topic during my first year in office, unfavorably characterized at the time by one of my nato ministerial colleagues as "megaphone diplomacy." yet, through it all, nato - as an alliance collectively - has for the most part come through for the mission in afghanistan. consider that when i became secretary of defense in 2006 there were about 20,000 non- u.s. troops from nato nations in afghanistan. today, that figure is approximately 40,000. more than 850 troops from non-

u.s. nato members have made the ultimate sacrifice in afghanistan. for many allied nations these were the first military casualties they have taken since the end of the second world war. frankly, four years ago i never would have expected the alliance to sustain this operation at this level for so long, much less add significantly more forces in 2010. it is a credit to the brave isaf troops on the ground, as well as to the allied governments who have made the case for the afghanistan mission under difficult political circumstances at home. over the past two years, the u.s. has completed the dramatic shift in military priorities away from iraq and towards afghanistan, providing reinforcements to allies who courageously had been holding the line in the south. these new resources - combined with a new strategy - have decisively changed the military momentum on the ground, with the taliban ejected from their

former strongholds. while president obama is still considering the size and pacing of the troop drawdown beginning in july, i can tell you there will be no rush to the exits. the vast majority of the surge forces that arrived over the past two years will remain through the summer fighting season. we will also reassign many troops from areas transferred to afghan control into less- secure provinces and districts. as the taliban attempt their inevitable counterattack designed to increase isaf casualties and sap international will, now is the time to capitalize on the gains of the past 15 to 18 months - by keeping the pressure on the taliban and reinforcing military success with improved governance, reintegration, and ultimately political reconciliation. given what i have heard and seen - not just in my recent visit to afghanistan, but over the past two years - i believe

these gains can take root and be sustained over time with proper allied support. far too much has been accomplished, at far too great a cost, to let the momentum slip away just as the enemy is on its back foot. to that end, we cannot afford to have some troop contributing nations to pull out their forces on their own timeline in a way that undermines the mission and increases risks to other allies. the way ahead in afghanistan is "in together, out together." then our troops can come home to the honor and appreciation they so richly deserve, and the transatlantic alliance will have passed its first major test of the 21st century -- inflicting a strategic and ideological defeat on terrorist groups that threaten our homelands, giving a long- suffering people hope for a future, providing a path to stability for a critically important part of the world.

though we can take pride in what has been accomplished and sustained in afghanistan, the isaf mission has exposed significant shortcomings in nato - in military capabilities, and in political will. despite more than 2 million troops in uniform - not counting the u.s. military - nato has struggled, at times desperately, to sustain a deployment of 25,000 to 40,000 troops, not just in boots on the ground, but in crucial support assets such as helicopters, transport aircraft, maintenance, intelligence, surveillance and reconnaissance, and much more. turning to the nato operation over libya, it has become painfully clear that similar shortcomings - in capability and will have the potential to jeopardize the alliance's ability to conduct an integrated, effective and sustained air-sea campaign. consider that operation unified protector is -- a mission with widespread political support, a

mission that does not involve ground troops under fire, and indeed, is a mission in europe's neighborhood deemed to be in europe's vital interest. to be sure, at the outset, the nato libya mission did meet its initial military objectives - grounding qaddafi's air force and degrading his ability to wage offensive war against his own citizens. and while the operation has exposed some shortcomings caused by underfunding, it has also shown the potential of nato, with an operation where europeans are taking the lead with american support. however, while every alliance member voted for libya mission, less than half have participated at all, and fewer than a third have been willing to participate in the strike mission. frankly, many of those allies sitting on the sidelines do so not because they do not want to participate, but simply because they can't. the military capabilities simply aren't there.

in particular, intelligence, surveillance, and reconnaissance assets are lacking that would allow more allies to be involved and make an impact. the most advanced fighter aircraft are little use if allies do not have the means to identify, process, and strike targets as part of an integrated campaign.

>> rising personnel costs, and ever growing share of already meager defense budgets. the result is that investment accounts for future modernization and other capabilities not directly related to afghanistan are being squeezed out as we are seeing today over in libya. i am the latest in a string of u.s. defense secretary to have urged allies privately and publicly, often with exasperation, to meet agreed upon nato benchmarks for defense spending.

however, physical, political, and democratic realities make is unlikely to happen anytime soon and even military stalwarts like the uk have been forced to ratchet back. today, just five of 28 allies, the u.s., the u.k., france, greece, along with albania, exceeded the agreed to% gdp spending on defense. regrettably, but realistically, the situation is highly unlikely to change. the relevant challenge for us today is no longer the total level of defense spending by allies, but how these limited and dwindling resources are allocated and what priorities. for example, though some smaller nato members have modestly sized unfunded militaries that do not meet the 2% threshold, several the allies have managed to punch well above their way because of the way they use the resources

they have, in the libyan operation, norway and denmark have provided 12% of allied strike aircraft and yet have struck about one-third of the targets. belgium and canada are making major contributions to the strike mission. these countries have with their constrained resources found ways to do the training, by the equipment, and feel the platforms necessary to make a credible military contribution. these examples are the exceptions. despite the pressing need to spend more on vital equipment and the right personnel to support ongoing missions - needs that have been evident for the past two decades - too many allies been unwilling to fundamentally change how they set priorities and allocate resources. the non-u.s. nato members collectively spend more than $300 billion u.s. dollars on defense annually which, if allocated wisely and

strategically, could buy a significant amount of usable military capability. instead, the results are significantly less than the sum of the parts. this has both shortchanged current operations but also bodes ill for ensuring nato has the key common alliance capabilities of the future. looking ahead, to avoid the very real possibility of collective military irrelevance, member nations must examine new approaches to boosting combat capabilities - in procurement, in training, in logistics, in sustainment. while it is clear nato members should do more to pool military assets, such "smart defense" initiatives are not a panacea. in the final analysis, there is no substitute for nations providing the resources necessary to have the military capability the alliance needs when faced with a security challenge. ultimately, nations must be responsible for their fair

share of the common defense. let me conclude with some thoughts about the political context in which all of us must operate. as you all know, america's serious fiscal situation is now putting pressure on our defense budget, and we are in a process of assessing where the u.s. can or cannot accept more risk as a result of reducing the size of our military. tough choices lie ahead affecting every part of our government, and during such times, scrutiny inevitably falls on the cost of overseas commitments -- from foreign assistance to military basing, support, and guarantees. president obama and i believe that despite the budget pressures, it would be a grave mistake for the u.s. to withdraw from its global responsibilities. and in singapore last week, i outlined the many areas where u.s. defense engagement and investment in asia was slated to grow further in coming years, even as america's traditional allies in that region rightfully take on the

role of full partners in their own defense. with respect to europe, for the better part of six decades there has been relatively little doubt or debate in the united states about the value and necessity of the transatlantic alliance. the benefits of a europe whole, prosperous and free after being twice devastated by wars requiring american intervention was self evident. thus, for most of the cold war u.s. governments could justify defense investments and costly forward bases that made up roughly 50 percent of all nato military spending. but some two decades after the collapse of the berlin wall, the u.s. share of nato defense spending has now risen to more than 75% -- at a time when politically painful budget and benefit cuts are being considered at home. the blunt reality is that there will be dwindling appetite and

patience in the u.s. congress -- and in the american body politic writ large -- to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense. nations apparently willing and eager for american taxpayers to assume the growing security burden left by reductions in european defense budgets. indeed, if current trends in the decline of european defense capabilities are not halted and reversed, future u.s. political leaders, those for whom the cold war was not the formative experience that it was for me, may not consider the return on america's investment in nato worth the cost. what i've sketched out is the real possibility for a dim, if not dismal future for the transatlantic alliance.

such a future is possible, but not inevitable. the good news is that the members of nato, individually, and collectively, have it well within their means to halt and reverse these trends, and instead produce a very different future -- by making a serious effort to protect defense budgets from being further gutted in the next round of austerity measures, by better allocating and coordinating the resources we do have, and by following through on commitments to the alliance and to each other. it is not too late for europe to get its defense institutions and security relationships on track. but it will take leadership from political leaders and policy makers on this continent. it cannot be coaxed, demanded or imposed from across the atlantic. over the life of the transatlantic alliance there has been no shortage of squabbles and setbacks. but through it all, we managed to get the big things right over time.

we came together to make the tough decisions in the face of dissension at home and threats abroad. and i take heart in the knowledge that we can do so again. >> next, austan goolsbee takes place in a forum on job creation. then a immigration in the european commission, and the commission on wartime contracting. tomorrow on "washington journal," dina eiboghdady talks about proposed regulations to limit debt restrictions on mortgages, which would limit debt to 36% of gross monthly income. wall street journal reporter evan perez looks set of bureau of alcohol tobacco and firearms program to stop u.s. guns from getting into the hands of the

mexican cartels. and christopher boucek examines the u.s. role in yemen. "washington journal" live at 7:00 a.m. eastern on c-span. connect with c-span on line with the latest schedule of dates and video on twitter, continue the conversation on facebook, and programming highlights on argued to channel. c-span and social media -- connect today. the u.s. economy would have to create 21 million jobs by 2020 in order to get back to pre- recession employment levels, according to a new study by the firm mckinsey and company. austan goolsbee and others discussed that report and the prospects for job creation at an event hosted by the committee for economic development. this is just over 2 hours.

>> we are going to begin a program in just a minute. ladies and gentlemen, could i ask for your attention and ask for you to take a seat so that we can begin our program promptly. i know that there will be people joining us, but we want to began promptly, since our keynote speaker is here. good afternoon. my name is charlie cobb and i'm the president for the committee for economic development. on behalf of art trusties and staff by want to thank you for coming this afternoon and to welcome you took our lunch forum on an economy that works -- job creation and america's future. this is a perilous moment for

our country and for our economy. job creation is sluggish and unemployment remains stubbornly high at 9.1%. the housing market is still unsettled. the traditional leaders of -- levers are tapped out. the overnight federal funds rate is effectively-, yet the same time bank lending and consumer spending have not rebounded grid fiscal policy is not constrained by as yet unresolved partisan, it is theological wrangling over spending, revenue, and the conditions for raising the debt ceiling. as our leaders did third -- and i think that there are only 13 legislative work days remaining in the house of representatives between today and of the sec it -- we are beginning to see clear and mystical evidence of a gathering storm. first on april 18, all warning

by standard and poor's, second, moody's expressing its concern on june 2, and two days ago, an adviser to the central -- chinese central bank warned that even a brief u.s. default would be open " playing with fire." and the cost of buying credit defaults swaps, though esoteric instruments used to insure against corporate bond defaults, recently has been at its highest level since march. but concern over the euro zone cohesiveness, sovereign debt, and the ongoing role of the euro may be masking future inflation possibilities associated with our annual $1.4 trillion deficit with our debt growing even higher. herbert stein is often quoted for having said that if something is unsustainable, it

will stop. the committee for economic development is working to address these concerns in two ways. in your package, it will find a copy of our report -- this way down. please read it. it is not the typical policy steady. you will find several journalistic scenarios of what the coming crisis could look like. "this way down" will persuade you there right now that we may be living to a period similar to august 1914. blissful the nile soon to be followed by an unexpected shot and then lights out. the second approach is to muster the voice of business to recruit outspoken, courageous business leaders who will speak for business -- our political leaders and the public about the urgency of insuring fiscal security. we have been carrying that message to the congress and last

week to the white house and also to our fellow citizens. with all this gloom, is there any hope? today's presentation by mckinsey and company on an economy that works, job creation and america's future comes on the eve of next week's meeting in north carolina of president obama council on jobs and competitiveness. the report for mackenzie identifies the need for new business creation and indicates the sector is likely to create those jobs and lays out what we need to do to ensure that these jobs materialize. it is always an honor for us to share the podium with our mckinsey and company colleagues. they are unfailingly right, focus, and relentlessly optimistic. to lenny, byron, and others, thank you for your work here today and for being with us today. enjoy your lunch. i'm going to turn the podium over to cde trustee liniment

those of -- who will introduce our speaker. >> i would also like to thank cde and charlie and mike for collaborating with us on this event and we look forward to an interesting dialogue with you over the course of this afternoon toward this important topic. i also like to acknowledge cde trustee bill lewis, the founding director 20 years ago. it is good to see you here. before i introduce our honored guest speaker, a lot like to take a couple of minutes about what motivated the mckinsey global institute to publish this report. one of the most troubling issues on the minds of business and policy leaders in the united states and all of us in this

room is how we're going to drive growth and renewal in the united states after the recession we are in. we have been thinking a lot about this challenge and embarked on a multi-year, multi faceted exploration of this topic. we have released two report so far, one on the necessity for productivity and innovation in today's economy. we will be following up today's report with one on the importance of solving big debts and the overhang issues in the u.s.. and finally won on public sector productivity. but today we want to talk about jobs. we do not have all the answers to this or other challenges we are exploring but we can bring a fact basis to these to frame the discussion in a way that keeps the focus on the market -- but important issue that would tried job creation after this difficult recession. let me introduce our honored

guest. austan goolsbee will give us an outlook on the economy, the recent john numbers, and then some commentary on the report that my colleagues and i will be presenting in just a moment. i think you all know austan goolsbee, the chairman of the council of economic pfizer's and a member of the cabinet for the president. he is on leave from the university of chicago for low longer where he investigated topics crucial to the day's economic challenges. he was an economic adviser to president obama in his 2000 -- in his 2004 senate campaign and during his 2008 presidential campaign. prior to joining the administration formally, he was a research associate at the

american bar association. he was also a member of u.s. census advisory committee. he was selected as one of the financial times six gurus of the future, the past of the best under 40 and named a young global leader at the 2005 global economic forum. he is a frequent columnist. importantly, he is the winner of the d.c. funniest celebrity contest. [laughter] with that, it is my pleasure to introduce austan goolsbee. >> thanks, everyone. i will speak for a little bit and you have got quite a program lined up. boy, charlie, if you kick this off with a note of optimism there. [laughter]

we started from crisis and we went to the lights went out and no one was heard of again. i would suggest in my reading of the report you will hear from mckinsey and company, that was not the main purport -- message. that is not the main message of the administration, either. charlie was speaking for himself only on that one. however talk about three general points. why i like the report -- analytically, there are some quibbles but it is what we should be doing. my first point is that the nature of rya rugs -- the recovery, where we are in crisis/recovery has changed quite a line. we go through the first year and a half, really, and at all right rescue mode.

a private sector is in freefall. in my view, anyone saying that what we should have done at that time is just get out of the way and let the private sector solve the problem itself, i think was not really paying attention because that was not in the cards. we were losing 750,000 jobs per month, the gdp shrinking at a 6% annual rate, we were in the steepest decline of most of our lifetimes. i will not say anything about anyone's age in this audience. but back in the depression days before we saw anything like that. now all over the last six to 12 months, we have shifted out of a rescue mode into something like a transition. we are trying to transition back to a growth mode where private sector companies start getting money on their balance sheets. their return to profitability.

output growth picks beat -- exceeds productivity and so they start hiring. the last 15 months, the private sector as more than 2 million jobs. the last six months, 1 million of those jobs. we do have a negative it jobs report this past month, no question. it followed three quite excellent jobs reports in the months previous to that. i do not think just in terms of the economic prospects, it is not a secret to anybody that you have a series of tragic disaster is both natural and man-made in japan, which have a clear negative impact on the supply chain of manufacturing around the world, not just in the u.s.. you have the events of the middle east and the gas price shocks. you have the european financial issues. those headwinds are slowing the

growth at the beginning of the year. i learned for many years in academics that economists have very vehement arguments about predicting the path, and so stay out of the predicting the future. the forecasters in that they expect many of those forces were temporary/partial, and expect a rebound in the second half of the year and going into 2012. the labor market remains heavily damaged. but it is on a trajectory of improvement. the nature of where we are in the business cycle is shifting. my point number two is, what the focus of policy should be, and where to expect recovery to come from is also changing.

the correct policy when you are in need debt of rescue mode is all about government-directed stimulus. it is not sustainable. that is not a critique for people to say that it is not sustainable. it was never meant to be sustained. the government involvement when we are teetering on the edge of a great depression, the government is the primary and indeed the only engine of recovery. but as you shift to better conditions, that is no longer true. it starts to become things that the government can do to facilitate the standing up of the private sector, and the nature of where you would see that growth. before people become too directed -- if we can i get back to the housing growth but we had in the 2000's, if we can i get to the consumption spending that we had in the 2000's, we cannot

recovery. that is the underlying premise of a lot of what you hear in the media. think for a moment about the 2000's, compared to all previous expansions in the united states, and compared to international expansions in the 2000's. it looks extremely different, because it is heavily weighted to consumer spending faster than income growth, into residential construction in the housing market. neither of which is sustainable, both of which fuelled by a bubble, and are not -- i would argue -- a healthy moral of what we want to return to. the healthy model that the president has outlined repeatedly that underlies -- when i was on john stuart, i was talking about when future, and he said stop saying that. the agenda formerly know as the wind did -- win the future

agenda, we need a broad base growth that is not just concentrated in excessive consumer spending and residential construction. we need export expansion. we need business investments to be a driver. we need innovation and small business to be the driver of growth. we want it to be spread across a lot of industries, not just in the few that are the director -- directly from the bubble- fuelled recovery. what i liked about this report is that it is engaged in the effort of the private sector thinking about viewing the opportunities for growth going forward. the united states remains the richest country in the world with the most productive workers in the world. some say, you have to stop

telling the president that. and i said why? they say, is not true. on purchasing power adjusted basis, the nation of luxembourg is higher than the united states. except for 300,000 people in luxembourg, we remain the most productive in the world. for all that talk about china, let us not forget that we are some 11 times richer than them. in the same way that in my shareold, our three kids' of growth in my height is 100%, but that does not make them taller than us. we have extremely productive industries. we have done substantially more competitive relative to other countries over the last two years, while going through this wrenching downturn.

one critique i would have of the analysis, however, in this report, is the notion of a jobless recovery as applied to now in some way compared to 2001 and 1991. it makes the argument that there has been a secular change in business cycles to take longer to recover. 2001, there is no question that that is true. it is almost two for years from the end of the recession before we generate any jobs in 2001. in my mind, that is totally different from the business cycle we have gone through. if you say how long it takes to get back to where you started, i guess, by that measure, it looks like it is a long time. but there is a major difference between down somewhat, and remaining stagnant, and plunging the most you have ever plunged

in 75 years and then working your way out of it, adding 2 million jobs over 15 months. that is not a jobless recovery. that is an incorrect definition of what a jobless recovery is. in 1991 and 2001, those are mild recessions. the 2007 recession is an intensive lead deep one. the 2007 recession, which begins at the end of 2007, is intensively deep. let us not confuse the rebuilding with what is stagnant. in the rebuilding, my fourth point -- the mckinsey report, and i would commend everybody to look at the jobs council meeting that is coming on monday -- they are thinking about a lot of these similar issues. they have been working on the factual basis, but the effort that the private sector that we identify what parts of the private sector will there be opportunities and make sure that we get our workers trained today to be filling the jobs that we are expecting in the

year, five years, 10 years down the road is critically important. the jobs council probably has some slightly different views of what are areas of expansion. in the mckinsey report, it foresees broad-based growth but a somewhat negative on the growth of manufacturing over the long term. ministration a jobs counsel are more positive on the prospects for manufacturing job growth -- the administration and jobs council. i think we anticipate quite a significant expansion of exports that we have been through because of some national and international imbalances that will have a tendency to close, i think the prospects for manufacturing growth are fairly decent.

in this part, we go way down. we have started coming back out of the whole -- hole. in this part of our coming back, we are still at a trouble spot and have a long way to go, but out of the 15% that has recovered, let's call it, that looks pretty good. it has been quite broad-base. manufacturing is had the fastest employment growth in almost 15 years. you have seen the health care sector, leisure, entertainment, media growing. you have seen services growing. you have seen retail trade growing. it has been far more broadbased than anything we saw in the 2000's, and the effort is we have to get the growth up, and it has to be powered by the private sector, so things like investment incentives through the tax code for business to build factories in the united states -- that was an inconceivable policy.

that would not have worked -- excuse me, we could conceive of the policy, but it would not have worked at a moment when the private sector is in freefall. we could have passed and investments of city in march of 2009. who in the private sector would have said it is a great time to go build a factory and by a lot of equipment in the united states when the gdp is shrinking 6.5% at an annual rate and people are seriously contemplating whether we are about to go into a depression? now, i feel like we are in a different spot, unless they listened to much to charlie -- too much to charlie. broad-based growth driven by the private sector, analyzed by the private sector, whether from mckinsey, the jobs council, or others, let us think about the areas where we have the opportunity. the last point i will say is we have to live within our means as a government and as a private sector. on the budget, we have known about the long run fiscal

challenge facing the country for 40-plus years, and that problem has not gotten materially worse in the last two years. the problem is rooted in the aging of the population, the acceleration of health care costs, and, i would argue, some of the tax policy choices made in the 2000's. we should and must address that, but let us not forget that that is not the number one issue facing the country. we must deal with that issue and live within our means, but the number one issue facing this country is that we grow, that we remain the richest, second only to 300,000 workers in luxembourg, most productive workers in the world going out now, five years from now, and 25 years from now. that means as we think about what must be cut, the what in many ways becomes more important than the how big.

it is not an argument like in 2009 of how big the stimulus is, how big the contraction is. it is -- does it really makes sense to go cut education and training spending at a moment when we know that over the next six to 18 months, there is every possibility that companies will say, "look, we want to hire, but we need people with the following skill sets, and we cannot find people that have those skills sets. we have training programs that can have them ready to fill those jobs as we come out of the downturn, and it is important that we not skimp on the main drivers that have made us the richest country in the world. the skill of our work force, the investment in innovation and r&d, the kind of public and private investment in infrastructure and capital that have kept us in those situations. so i thank you for your time,

and i envy you the panels and research that you are all about to hear. thank you. [applause] >> austan, thank you very much. just two points i would like to make. first, thank you for being with us this afternoon. second, thank you very much for your public service to the country. you have a very important job, and you have held it extremely well. most of the trustees who know me would tell me that i am an optimist, for the most part. we're trying to galvanize the business community to get on board in helping to deal with some of these issues around the country's fiscal health and also the priority of economic growth. if i could just reverse the normal phrase that you here in washington, we are from the private sector, and we are here to help. [laughter] i would now like to introduce

james and susan from mckinsey, who are going to present the findings and recommendations of the report on job creation. james is a senior partner and is one of the leaders of mckinsey's global high-tech media and telecommunications practice. he has a distinguished academic background as well. having a bsc in electrical engineering, first-class degree from the university of zimbabwe. he then went on to be a rhodes scholar at oxford and holds a bachelor's, master's, and another master's degree in electrical engineering, mathematics, and computer science. he has been a fellow at mit and also at oxford. we are honored to have you with

us to present the mackenzie report -- mckinssey rep -- mckinsey report. susan is based here in washington. she has done an enormously wide-ranging amount of research on general issues relating to global financial markets, economic growth, global investments, saving trends, deleveraging, which we hope will soon be over, long-term growth prospects, and a number of very important topics for the economy and the country. she has been at mckinsey since 1996. she has a ph.d. in applied economics from stanford and also an undergraduate degree with class distinction from northwestern university. james and susan, please come up, and the floor is yours. thank you. [applause]

>> good afternoon. i would like to thank the national press club for hosting us today, and i would also like to thank the ced for convening this event, this wonderful event, and i would like to thank all of you for taking time out of your busy days to come and hear what we have to say and discussed what i think is the most important issue in the american economy at the moment, which is the issue of jobs. the issue is, to put it simply, that there are not enough of them, and if trends continue as they are, there will not be enough of them in the future. i think this is a pretty fundamental issue. we are all aware of the specifics -- statistics the department of labour put out in

the last couple of weeks. we could debate whether that is a blip or a trend, but what is largely up for debate at this stage is the fact that there are 7 million-plus americans who are unemployed. 4.3 million of them have been out of work for more than a year. unemployment rates are, depending on how you want to count it, 9.1%. those are pretty substantial fact that represent essentially a crisis. partly because this is a crisis for families and a crisis for america as a whole, and also from economic standpoint. especially at this time, the long-term effects of unemployment really make a fundamental impact on people's lives, and at the same time, for the economy to actually carry and manage and provide services for the large, unemployment public -- unemployed population is a substantial undertaking. these are substantial issues, and with all due respect to the comments that i think austan made, the prevailing view has been that the economy expands, the right things will happen

and jobs will follow. i think that presumption is a belief in question. i think it is a worthwhile debate and discussion to have, to actually examine the facts about that, and that is a lot of what we would like to discuss today. what we have done as part of this report we're going to talk about is we did the usual thing we do, which is to look at the macro economic data, the public data and private data we have access to, so we delve through a lot of that. we spent time with a lot of companies, both large and small, actually talking to them, trying to understand what they were doing, what was happening with jobs, and in addition, we did a pretty substantial survey of business leaders -- about two dozen companies participated -- as we tried to get to the groups of these questions. i also want to make sure as a we're very grateful for the help we got.

we could not have done this war without -- we could not have done this work without them, so we are very appreciative of that. with that, let me get into this. i am going to say some remarks and described the situation as we see it. my colleague will also take us through some of the explanations for why we think all that is happening. i would like to point out four interesting characteristics, just from what the facts seem to suggest. let me start with this -- it is quite striking if you look at the countries that we often compare ourselves to -- the u.k. and germany -- we obviously had a substantial decline in gdp growth. germany and the u.k. actually had an even deeper decline. yet, when you look at the outcomes from a job standpoint over to the right, you can certainly see that our decline

in employment is certainly the deepest. contrast that with germany. i think it raises some interesting questions about the kinds of choices and how we want to think about the choices we make as a society and how we deal with how the economy handle jobs growth and performance over time. as you will see in the report, there are some interesting striking things, for example in the case of germany, that germany did that are certainly worth looking at. not with an eye to replicating them because that is a different culture, but i think there are some instructive things to learn. let me point out to an interesting observation. two things are quite striking. if you take your eye from left to right, the least skilled workers were affected the deepest. with the colors represent here, the green of the color -- if the color is very green, it means

that jobs actually grew for that particular group. it is red, it gives you a sense of the deaths of the decline. as you go left to right, you will see that the least skilled workers in the u.s. economy suffered the most, but if you go to the far right, which probably represents most everybody in this room, you could argue there was not that much of a recession from a jobs standpoint, actually. maybe with the exception of financial services. in those sectors, as you go to the far right, most jobs actually grew. so that is the first observation. the second observation you can make is if you look at the rose by sector, the sectors at the bottom -- educational services, government, and health care -- effectively had no recession at all from a job standpoint. you could argue those are the sectors that have some natural demand. but it is actually quite

striking. the sectors that were hit the hardest -- no surprise, given the secular trend we have seen over the last few decades -- manufacturing is right up there at the top. these are some of the features of the character of the jobs decline we have seen in this particular recession. there is a lot of observation to be made. it is quite striking, but if you put the recession aside, it may well be that our jobs engine was already in trouble even before the recession. if you look at the net change of employment through these different periods, look at 2000-2007. that was before the recession. job growth even then was not all that spectacular. in fact, you could argue, even though jobs were growing in 2000-2007, it was probably of the kind you did not want. back to the commons that -- coments that austan made, much

of that was linked to what you might call the bubble sectors. much of that was construction work. a lot of these were jobs that always go anyway -- education, health care, government. even that is still a troubling number, even though it is still a positive number. there is a question on the table about was the jobs engine already in trouble even before the recession? the recession just put a sharp light on the problem. then, because of the debate that austan teed up about, whether you call it a jobless recovery or not -- the point is the data is quite striking. it is the case that you go back all the way to 1948, it used to be that what the chart basically shows is the lag between when gdp bounces back to

pre-recession levels and how quickly jobs bounce back to pre-recession levels, so you can see from about 1948 to 1981, it happen more or less like clockwork every six months or so. gdp and jobs bounce back. clearly, something different seems to be happening. to be fair, in 2008, obviously, this was the deepest recession for a very long time, but from the point of view of work, if you are a worker, you still feel this because it still feels as if it is going to take a very long time. the? that is on top of 2008, if we keep creating jobs at the current rate at which we're doing it, the number will end up looking like 60-something months. if nothing changes from the current trajectory. that is how long it will take to get back to pre-recession

levels. this poses an important question about is there something fundamental that has changed quite apart from the fact that this was a particularly deep recession, yes, but has something else changed that causes us to rethink this presumption that as long as gdp comes back, jobs will follow? with that, let me hand over to my colleague, susan, who will take up the next piece of this. >> ok, thank you, james. this picture is troubling, and our research suggests that there are least three things that are different in the way the economy works that is producing these increasingly lengthy periods before we get employment back. unless we address these causes, is unlikely that we will, in fact, get the pre-recession level of jobs for another five years. the first factor is simply that the competitive dynamics of the economy are different than they used to be. in recessions of the past, workers and companies with both

share in the pain of the downturn. if you go back to the 1973 recession, you will see that for every percentage point decline in gdp, employment accounted for about 1/3 of that decline, but the productivity on the part of companies accounted for the other 2/3. fast forward to the 2000's. you see that the decline in employment makes up almost all of the decline in gdp. over time, companies have gotten better at restructuring and bringing efficiency out of processes, so this means that when workers are laid off, is more likely to be a permanently off than a temporary layoff, and rather than going home and wait a few months or quarters until they get the call back to work, workers are now permanently out of a job. this means they have to find a job, at the very least, in a different company and likely in a different sector and maybe a different location, and all of this takes time. that brings me to the second cause of this increasingly link

period it takes to regain employment -- lengthy period. that brings me to where the workers are and where the jobs are and the mismatch that austan talked about between the skills that workers have any skills that employers are look at -- looking for pure looking at the unemployment rate, you will see that the 9% unemployment rate hyde's wide disparity across states and counties. the states with the highest unemployment rate, nevada, is 14%. that is 10 percentage points higher than the state with the least unemployment, which is north dakota. we find that during this session, just three states accounted for 1/3 of all job losses, and that is california, florida, and michigan. the states, while they are large, account for only 20% of the work force. at a time when many americans to be as mobile as possible, to go to the places where jobs are being created, we find that

just the opposite is happening. back in the 1950's and 1960's, you found that one in five americans moved every year. that started to change in the late 1980's. today, with the housing crisis and people unable to sell their houses, you see it is down to one in 10. there are several different reasons for this decline in mobility. part of it is the aging in population. as people get older, they are less mobile. part of it is the rise in home ownership. we find a strong correlation between mobility and whether you are a lender or an owner. sort of unintended consequence of the rise in ownership. finally, you have the will income families. we hear from many interviews with companies that people are not as willing to pick up and move as they used to be. at a time when unemployment is differ across the country, you have people less able or willing to pick up and move for their jobs. the second half of mismatch is

about skills. it is a cruel irony that today, with 9% unemployment and the survey we did of 2000 companies, we found that 40% of companies who say that they want to hire in the next 12 months have had positions open for six months or longer already. this means they cannot find the workers they need. there are shortages in engineering and computer science, and we have heard about this for a long time, but we have heard about skill shortages across a right range of industries, occupations, and different levels -- across a wide range of industries, occupations, and different levels. an executive at one oil services company said it is so hard to find a welder who can work on an oil rig that they are offering salaries of more than $100,000 to get those people. there is a clear mismatch somehow between what students are studying and what they are learning about versus what employers are actually

demanding. a final reason for this jobless recovery is is the sharp decline in the rate of new business creation we have seen over the last three years. this chart shows you the number of new businesses created each year. you see that in the 2001 recession, the rate of new business creation fell slightly, about 5%. the same would be true if we had extended the start back to the 1990's and 1980's. but in this recession, you see that the rate of new business formation has fallen by 23%. that is quite a lot. we calculate that had we not seen that drop off, despite the fact that some of those new start-ups would have already failed and gone out of business, you would have had 1.8 million more jobs in the u.s. today. addressing this -- reviving the new business start up engine will be quite important. these challenges are important because as we look ahead over the next 10 years, we find that

the u.s. needs to create 21 million jobs. this is 7 million jobs to replace the ones still lost from the recession and another 14 million jobs because our work force is still expanding. to create employment and get back to a 5% unemployment rate by 2020, the size of the challenge is 21 million jobs. we can argue, an economist will, about what a 5% unemployment rate is the natural rate or whether it should be higher or lower, but we did not take a stake in that debate and said if you take that as a ballpark, you look at needed to create roughly 21 million jobs. can we do it? where will those come from? we decided to take an approach that mgi has used in the past, very successfully, which is to take a look at sectors of the economy. we did not build a macro economic forecast of where job growth is going to come from. the bureau of labor statistics has won out there.

instead, we look at the big sectors of the economy -- six in particular -- that account for about 2/3 of employment today, and we calculate will likely account for 70% to 85% of future job growth. what we looked at was both the macro economic forecasts for demand in the sectors. we look at productivity trends and did a lot of interviews, as james manchin, with people in the sector to identify business models that could push job creation of or down -- as james mentioned. for each sector, we created a low, middle, and high scenario. only in the high scenario does the u.s. actually get back to 5% unemployment by 2020. on one hand, that is quite a sobering result, and it illustrates the magnitude of the challenge before the country today. on the other hand, we think this is doable.

if you remember the chart james showed you about the previous decade, this is the latest job creation you saw in every decade except the last one. we can get back to an economy that even resembles what we had in the 1990's, this is achievable. that means sparking innovation and having topline, sustainable demand growth that creates jobs rather than productivity gains that are driven more by labor- replacing efficiency gains. to get behind these scenarios, i will show you a bit about our sector projections. you see these six sectors at the top are the ones that we did what we call a deep dive. you will see that the big job creators over the next 10 years are likely to be health care, business services, and leisure and hospitality. i could talk to all the different assumptions in each of them, but to give you an illustration of what this high job growth scenario looks like, let's consider health care. the demand is growing very

rapidly for health care services. this is due to the aging of the population. people over the age of 65 spend five times as much on health care services as people under age 18, not surprisingly. at the same time, we had the potential expansion of insurance coverage to many americans who did not have insurance before. this could also drive expansion of demand. many people may ask if we are trying to control health care spending costs, and indeed, the nation is. that can be done in different ways, though. when we talk to professionals and experts in the sector, they say it is possible to control spending costs and not kill the job engine in this sector if we redesign how health care services are delivered and by whom. this will take some regulatory change in terms of the scope of practice laws, but if you look across the u.s. today, you see some states have different laws regarding who can provide what services to home -- whom, but

many models use lower skilled health care professionals to do many of their routine things like administer a strep test or get a flu vaccine. if we can develop a health-care models that equalize across the united states, you could see both job growth and a slower trajectory in health-care spending. manufacturing is another sector that folks look at what at. i will not say that our manufacturing forecast is not optimistic. remember, this is looking over 10 years. the manufacturing sector in the u.s. and every other advanced economy, including japan, south korea, the nation's you think of as big manufacturing countries, have seen manufacturing employment shrank over time, and that is simply due to technological change. if we have 10 years where we actually hold manufacturing employment flat, that implies we are gaining share.

rather than saying there is no potential year, that is quite an outside. indeed, it could be quite difficult to achieve the high job growth scenario if you have manufacturing continuing to shed millions of jobs, as it has in the last decade. even if we get to the high jobs growth scenario, the next challenge is will we have the people we need to fill those jobs? when we overlay the demand on the high job growth scenario, compared to the supply of labor or the future labor force projections, you see that at current trends, we are likely to have not quite enough college graduates. we see a gap of about 1.5 million. at the other end of the spectrum, we see nearly 6 million high school dropouts that are unlikely to have worked for them. there is definitely a challenge in increasing the trend towards more education. potentially, as troubling or even more troubling is the fact

that when students do get post- secondary education, they are often studying things that simply not in demand. at current projections, you see that in 2020, the u.s. will have somewhere in the neighborhood of 55 million college graduates, but you see it will have twice as many people with business and social science backgrounds like my own, than science, technology, engineering, and math. many of the people would gomanyo business. something can be done to increase the number of what we call the stem graduates. this is just not about college graduates, it is though cash it -- vocational levels as well. simply put, either workers do not have information about job demand is coming from. as charlie pointed out, we do

tend to be an optimistic bunch. despite the magnitude of the problem, we looked at how technology is changing the nature of work which poses potential challenges for workers. also opens up new opportunities for how and where jobs could be created. when you look across the united states at the spread of broadband and new scheduling software, businesses can deploy workers and a much more flexible manner than a cut in the past. people can work miles apart on different coast. they can work from center is in love plot -- low-cost parts of the country. this is opening up new opportunities. consider business services. what you find is that the economics of a country based in many types of business services in low car -- low-cost parts of

the united states has shifted. very different than it was 10 years ago. what we find increasingly is that companies that are setting up remote service centers in places like nebraska or parts of florida, or even employing workers to work from their homes. many companies springing up managing hordes of workers that are working out of their houses. one insurance company has claims processors working out of their houses all of the united states. one airline has three-quarters of its 8000 residential project reservation agents working out of their homes in the salt lake city area. in an era where americans are increasingly less mobile, this could be an important part of the solution. at the same time can we see that businesses are planning to

employ people more flexibly. we found that over a third say that over the next year they think they will hire more part- time workers, a trend you already see in the data over the last few years, ward temporary or contract workers, and more telecommuting. all of these opportunities mean that companies can be creative about how the employee u.s. labor, and am i mean new areas of jobs open up. when we think about tightrope growth scenario, it will require using more flexible ways of how you employ people. as we think about the solutions as to how to get to the high job growth scenario, there will be a framework that we have developed to think about a solution space. >> i think that america is in a job crisis. what do we do about it?

we had a global incident, we're not policy specialist, and we would like to just identified the issues and try to provide up back basis. but when you look it all of these questions, what we uncovered in a word, there seems to be four areas where if we can get real solutions from business, from the public, from the private sector, from entrepreneur is, it would make a big difference to the problem. we will identify these four areas. the first area is the idea of high skill. this goes to the core of what susan was describing. we do have the fundamental job mismatch here. with the educational system is creating in terms of the quality is not up to the task. it is also important to think about even how to expand the

question of skilled. they are different ways to think about that. and that gets into considerations of help you get from integration in the short time and this is at the core of the biggest challenges that we have to solve it. keep in mind that we're not just talking about the most educated people or the same disciplines. and quite a few examples you will see in the report, many feel like vocational skills, the welder, for example, not necessarily the most highly educated skilled, but different kinds of skills. the second issue would point to is what we call high share. when you think about

globalization, it is so clear to us that the u.s. has benefited as much from that. we're not suggesting protectionism or tariffs, that is not what we're suggesting at all. but how does the united states take advantage of the opportunities to create employment here. other countries are investing his country, and some might include thinking about the opportunities about other ways to take different low-cost locations within the u.s.. that is not true when you go to the local level in many instances. other ways to take advantage of it. many of the new entrepreneurs in the world and, building new businesses, a lot of that is

outside the u.s.. we think there is a lot that can be done around the question of addressing the issues of getting a fair share. and spark as the next one. one of the things that is striking from our work in this report and other reports is that in aggregate there is less innovation going on in the u.s. economy than in the previous decade. in fact as susan pointed out, we have more opportunity of growth come from efficiency-driven mechanisms as opposed to improving value about put out of the economy. the way you do that mostly comes from innovation. the broad point of how you recognize innovation more broadly in companies both large

and small. there is also a new company creation. the rate at which new companies are being formed has slowed down. we know that part of that has to do with the credit and the liquidity situation because many small businesses get formed through people borrowing from their banks and credit cards and so forth. as that improves, that will improve the rate at which new companies are created. there is more there to be done in just to accelerate the rate in which new businesses are being created. also the issue of how to scale of new industries. there is a lot of discussion about the new technologies which are very exciting and good for growth in the long run. yet the rate at which those are coming through the economy is actually rather slow. there may be some constructive lessons to learn from what happened in the early days of the semiconductor industry.

if you remember, in the 1950's, one of the key things that made a big difference in how quickly that industry group is because the government increased the market. you have to wonder, is there some way to accelerate how quickly these markets come to fruition? there are some policy choices that have to be made that can accelerate how quickly these new technologies spread through the economy and also help drive growth. these are some of the questions we think are important to think about as we think about policy and actions that the private sector and government can do. let me point to the last one, which is high speed. what we are really talking about here is removing the impediments that are in the way of creating jobs. this is not about taking away regulations as much as there

just seems to be so much that takes too long for businesses that are trying to create jobs. we heard over and over again in our surveys about how long it took to process legislation, whether getting through zoning laws are getting permits for this, that, and the other, in comparison to what it now takes to do those things in other countries. other countries have become so much more adept at making it easy for companies to go through those things and invest and create jobs. this is an important area to address, to take away many of the impediments that are in the way of creating jobs very quickly. with that, let me stop. we want to make sure we give enough time for our panel. we are also optimistic, because we think there is enough flexibility and innovation that happens and that should and can happen in this economy that should lead to job growth.

this should not be daunting for a country like the united states. thank you. [applause] >> thank you, james and susan. we now have a chance to be joined by a distinguished panel to engage in a conversation about what this all means before opening it up to the audience for questions and answers. i would like to briefly introduce the panel, starting with our distinguished moderator. zanny minton beddoes. he is the economics editor based in washington d.c..

she oversees global economics coverage, managing a team of writers around the world. before she moved to washington, she was the emerging market correspondent based in london, traveling in latin america and eastern europe. she spent two years at the imf, where she worked on macroeconomic adjustment programs in africa and transitional economies of eastern europe. she was an adviser to the ministry of finance and poland, working with a small group. now let me introduce the remainder of the panel, going alphabetically from mike left to right. auguste.dea byron is a senior partner partnermckinsey where he works in economic development. he also serves as a director of the social sector office and works with institutions and projects to help improve education, economic growth, and prosperity. he has been in washington since 2007. he is the co-founder and board chairman of the hope st. group, a national volunteer

organization of executives, professionals, an entrepreneur, working on developing public policies to expand economic opportunity. he is on a number of not-for- profit boards including yale, the center for american progress, and is a member of the council of foreign relations. he is also the co-author of the report you are seeing today. to his left is martin bailey. --martin baily. he rejoined brookings in september 2007 to develop a program of research on business and the economy. he is studying the financial crisis as well as productivity and technology. he is also a senior adviser to mckinsey. he is an economic adviser to the congressional budget office and a director of the phoenix

companies of hartford, connecticut. he is co-chair of the financial reform task force and a member of the swan lake group of academics working on financial reform issues. previously, martin was the chairman of the council of economic advisers under president clinton. to his left as carl camden, president and ceo of caylee services. -- kelly services. he is also on that companies board. kelly is a fortune 500 company headquartered in troy, michigan. he has an undergraduate degree in psychology and speech, a graduate degree and a doctorate from ohio state in communications. he also was an associate professor in the communications department at cleveland state university. university.